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in Novato, CA
Both 1099 and bank statement loans serve self-employed Novato borrowers, but they verify income differently. Your documentation setup determines which path closes faster.
Most Marin County contractors assume one option always beats the other. The reality depends on how your business deposits flow and what deductions you take.
1099 loans use your year-end tax forms to prove income. Lenders typically average your last two years of 1099 earnings after business deductions.
This works well if you take minimal write-offs and your 1099s show steady income. Most lenders require 620+ credit and want to see consistent year-over-year earnings.
The underwriter adds up your 1099 forms and divides by 24 months. That monthly average becomes your qualifying income, minus any documented business expenses.
Bank statement loans pull your income from 12 or 24 months of business bank deposits. Underwriters don't care what your tax return shows.
You submit personal or business bank statements showing regular deposits. The lender calculates an average monthly income based on those deposits, often applying a 50% expense ratio.
This path helps Novato borrowers who write off significant expenses or run cash through their business. Your actual deposits matter more than your taxable income.
The core split comes down to tax strategy. If you minimize deductions to show strong taxable income, 1099 loans work cleanly with straightforward documentation.
Bank statement loans flip that logic. They benefit borrowers who maximize write-offs and show lower taxable income but have healthy deposit patterns in their accounts.
Credit requirements run similar for both, usually 620 minimum. Rates vary by borrower profile and market conditions, but bank statement loans sometimes price slightly higher due to perceived risk.
Choose 1099 loans if your forms show clean, consistent income over two years and you don't heavily deduct expenses. This path costs less and closes faster.
Pick bank statement loans if you write off most earnings or your 1099s don't reflect true cash flow. You'll need organized statements covering 12-24 months of deposits.
Many Novato self-employed borrowers switch between options based on recent tax filing strategy. Run both scenarios with actual numbers before deciding which documentation path to pursue.
No, lenders pick one income calculation method per file. Choose the approach that shows your income most favorably based on your documentation.
Personal accounts work if deposits clearly show business income. Business accounts often provide cleaner documentation and stronger approval odds.
Rates vary by borrower profile and market conditions. 1099 loans sometimes price slightly better due to tax-verified income documentation.
Most lenders require two full years of 1099 forms. They average the total across 24 months to calculate qualifying income.
Lenders average deposits over 12-24 months to smooth volatility. Extreme month-to-month swings can complicate approval but don't automatically disqualify you.